Euro drops below 1.1750 as Eurozone consumer confidence and comments from the Fed approach

• The EUR/USD pair is projected to drop to approximately 1.1730 during the early European sessions on Monday.
• Last week, the Federal Reserve implemented interest rate cuts while indicating a gradual approach to future changes, which has bolstered the US dollar.
• ECB Vice President De Guindos mentioned that the bank may not have completed its series of rate cuts.

On Monday morning, the EUR/USD is expected to remain in the negative zone for the fourth day in a row, hovering around 1.1730. This decline comes as the US dollar rebounds after last week’s announcement from the Federal Reserve regarding rate adjustments. Today’s highlights will include the Eurozone Consumer Trust report and comments from Federal Reserve officials.

While the Fed delivered the anticipated rate cuts last week, there wasn’t an urgent push to lower borrowing costs rapidly in the months ahead. During a press conference, Chairman Jerome Powell described the decision as a “risk management reduction,” addressing concerns regarding a softened labor market, even though inflation still seems to be on the rise. His comments imply a longer-term outlook, which I think some investors weren’t quite expecting. This has provided a bit of support for the USD, serving as a headwind for the EUR/USD pair.

In the coming week, Fed officials, including Powell, are slated to speak. Traders will be keenly aware of their insights on the economy and the independence of the central bank. It’s possible that renewed concerns regarding the Fed’s independence could offer short-term advantages to the USD.

Meanwhile, during its September meeting, the ECB decided to keep its three main rates unchanged. They continue to adopt a meticulous, data-driven approach to monetary policy. Recently, Vice President de Guindos remarked that the central bank’s series of rate cuts, which began in June 2024, may not be finished. Conversely, Council member Martins Kazak cautioned that central banks need to be prudent in light of maintaining inflation below 2%, suggesting that more action could be required.